Vishay Intertechnology Earnings 2019-03-30

VSH 10Q Quarterly Report

Balance Sheet	Income Statement	Cash Flow

10-Q 1 vishayintertech_10q.htm QUARTERLY REPORT

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 30, 2019

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission File Number 1-7416

VISHAY INTERTECHNOLOGY, INC.

(Exact name of registrant as specified in its charter)

Delaware		38-1686453
(State or Other Jurisdiction of Incorporation)		(I.R.S. Employer Identification Number)

63 Lancaster Avenue Malvern, PA 19355-2143		610-644-1300
(Address of Principal Executive Offices)		(Registrant’s Area Code and Telephone Number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ý Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files.)

ýYes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

	Large accelerated filer ý	Accelerated filer ☐
	Non-accelerated filer ☐ (Do not check if smaller reporting company)	Smaller reporting company ☐
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐ Yes ý No

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol	Name of exchange on which registered
Common stock, par value $0.10 per share	VSH	New York Stock Exchange

As of May 7, 2019, the registrant had 132,338,451 shares of its common stock and 12,097,409 shares of its Class B common stock outstanding.

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VISHAY INTERTECHNOLOGY, INC.

FORM 10-Q

March 30, 2019

CONTENTS

			Page Number
PART I.		FINANCIAL INFORMATION

	Item 1.	Financial Statements

		Consolidated Condensed Balance Sheets – March 30, 2019 (Unaudited) and December 31, 2018	4

		Consolidated Condensed Statements of Operations (Unaudited) – Fiscal Quarters Ended March 30, 2019 and March 31, 2018	6

		Consolidated Condensed Statements of Comprehensive Income (Unaudited) – Fiscal Quarters Ended March 30, 2019 and March 31, 2018	7

		Consolidated Condensed Statements of Cash Flows (Unaudited) – Fiscal Quarters Ended March 30, 2019 and March 31, 2018	8

		Consolidated Condensed Statements of Equity (Unaudited)	9

		Notes to Consolidated Condensed Financial Statements (Unaudited)	10

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	48

	Item 4.	Controls and Procedures	48

PART II.		OTHER INFORMATION

	Item 1.	Legal Proceedings	49

	Item 1A.	Risk Factors	49

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	49

	Item 3.	Defaults Upon Senior Securities	49

	Item 4.	Mine Safety Disclosures	49

	Item 5.	Other Information	49

	Item 6.	Exhibits	50

		SIGNATURES	51

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

VISHAY INTERTECHNOLOGY, INC.

Consolidated Condensed Balance Sheets

(In thousands)

	March 30, 2019			December 31, 2018
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	749,426		$	686,032
Short-term investments		8,411			78,286
Accounts receivable, net		391,960			397,020
Inventories:
Finished goods		137,317			138,112
Work in process		194,617			190,982
Raw materials		148,293			150,566
Total inventories		480,227			479,660

Prepaid expenses and other current assets		141,555			142,888
Total current assets		1,771,579			1,783,886

Property and equipment, at cost:
Land		74,499			87,622
Buildings and improvements		569,395			619,445
Machinery and equipment		2,525,394			2,510,001
Construction in progress		119,470			125,109
Allowance for depreciation		(2,339,944	)		(2,373,176	)
Property and equipment, net		948,814			969,001

Right of use assets		96,281			-

Goodwill		150,628			147,480

Other intangible assets, net		67,524			65,688

Other assets		146,224			140,143
Total assets	$	3,181,050		$	3,106,198

Continues on following page.

VISHAY INTERTECHNOLOGY, INC.

Consolidated Condensed Balance Sheets (continued)

(In thousands)

	March 30, 2019			December 31, 2018
	(Unaudited)
Liabilities and equity
Current liabilities:
Notes payable to banks	$	18		$	18
Trade accounts payable		192,221			218,322
Payroll and related expenses		135,821			141,670
Lease liabilities		14,760			-
Other accrued expenses		160,756			229,660
Income taxes		70,653			54,436
Total current liabilities		574,229			644,106

Long-term debt less current portion		492,830			494,509
U.S. transition tax payable		154,953			154,953
Deferred income taxes		86,209			85,471
Long-term lease liabilities		86,684			-
Other liabilities		79,492			79,489
Accrued pension and other postretirement costs		254,835			260,984
Total liabilities		1,729,232			1,719,512

Redeemable convertible debentures		206			2,016

Stockholders' equity:
Vishay stockholders' equity
Common stock		13,234			13,212
Class B convertible common stock		1,210			1,210
Capital in excess of par value		1,425,101			1,436,011
Retained earnings (accumulated deficit)		24,922			(61,258	)
Accumulated other comprehensive income (loss)		(15,323	)		(6,791	)
Total Vishay stockholders' equity		1,449,144			1,382,384
Noncontrolling interests		2,468			2,286
Total equity		1,451,612			1,384,670
Total liabilities, temporary equity, and equity	$	3,181,050		$	3,106,198

See accompanying notes.

VISHAY INTERTECHNOLOGY, INC.

Consolidated Condensed Statements of Operations

(Unaudited - In thousands, except per share amounts)

	Fiscal quarters ended
	March 30, 2019			March 31, 2018

Net revenues	$	745,159		$	716,795
Costs of products sold		534,000			511,495
Gross profit		211,159			205,300

Selling, general, and administrative expenses		103,424			101,238
Operating income		107,735			104,062

Other income (expense):
Interest expense		(8,392	)		(7,677	)
Other components of net periodic pension cost		(3,396	)		(3,519	)
Loss on early extinguishment of debt		(1,307	)		-
Other		5,308			(847	)
Total other income (expense)		(7,787	)		(12,043	)

Income before taxes		99,948			92,019

Income tax expense		24,307			29,474

Net earnings		75,641			62,545

Less: net earnings attributable to noncontrolling interests		182			179

Net earnings attributable to Vishay stockholders	$	75,459		$	62,366

Basic earnings per share attributable to Vishay stockholders	$	0.52		$	0.43

Diluted earnings per share attributable to Vishay stockholders	$	0.52		$	0.39

Weighted average shares outstanding - basic		144,554			144,327

Weighted average shares outstanding - diluted		145,289			159,502

Cash dividends per share	$	0.0850		$	0.0675

See accompanying notes.

VISHAY INTERTECHNOLOGY, INC.

Consolidated Condensed Statements of Comprehensive Income

(Unaudited - In thousands)

	Fiscal quarters ended
	March 30, 2019			March 31, 2018

Net earnings	$	75,641		$	62,545

Other comprehensive income (loss), net of tax

Pension and other post-retirement actuarial items		1,457			1,607

Foreign currency translation adjustment		(9,989	)		27,024

Other comprehensive income (loss)		(8,532	)		28,631

Comprehensive income		67,109			91,176

Less: comprehensive income attributable to noncontrolling interests		182			179

Comprehensive income attributable to Vishay stockholders	$	66,927		$	90,997

See accompanying notes.

VISHAY INTERTECHNOLOGY, INC.

Consolidated Condensed Statements of Cash Flows

(Unaudited - In thousands)

	Three fiscal months ended
	March 30, 2019			March 31, 2018

Operating activities
Net earnings	$	75,641		$	62,545
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		40,428			40,558
(Gain) loss on disposal of property and equipment		(173	)		(176	)
Accretion of interest on convertible debt instruments		3,490			1,309
Inventory write-offs for obsolescence		6,967			5,457
Deferred income taxes		(2,614	)		7,014
Loss on extinguishment of debt		1,307			-
Other		(1,744	)		2,908
Net change in operating assets and liabilities, net of effects of businesses acquired		(43,784	)		(72,756	)
Net cash provided by operating activities		79,518			46,859

Investing activities
Capital expenditures		(36,367	)		(28,273	)
Proceeds from sale of property and equipment		395			184
Purchase of businesses, net of cash received		(11,862	)		(12,072	)
Purchase of short-term investments		(1,920	)		(39,243	)
Maturity of short-term investments		71,455			93,194
Other investing activities		2,893			(935	)
Net cash provided by investing activities		24,594			12,855

Financing activities
Repurchase of convertible debentures		(22,695	)		-
Net proceeds (payments) on revolving credit lines		-			34,000
Net changes in short-term borrowings		-			52
Dividends paid to common stockholders		(11,249	)		(8,918	)
Dividends paid to Class B common stockholders		(1,028	)		(817	)
Cash withholding taxes paid when shares withheld for vested equity awards		(2,659	)		(2,297	)
Net cash provided by (used in) financing activities		(37,631	)		22,020
Effect of exchange rate changes on cash and cash equivalents		(3,087	)		9,825

Net increase in cash and cash equivalents		63,394			91,559

Cash and cash equivalents at beginning of period		686,032			748,032
Cash and cash equivalents at end of period	$	749,426		$	839,591

See accompanying notes.

VISHAY INTERTECHNOLOGY, INC.

Consolidated Condensed Statements of Equity

(Unaudited - In thousands, except share and per share amounts)

	Common Stock		Class B Convertible Common Stock			Capital in Excess of Par Value			Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Income (Loss)			Total Vishay Stockholders' Equity			Noncontrolling Interests		Total Equity
Balance at December 31, 2017	$	13,188	$	1,213		$	1,752,506		$	(362,254	)	$	25,714		$	1,430,367		$	2,032	$	1,432,399
Cumulative effect of accounting change for adoption of ASU 2016-01		-		-			-			1,801			(1,801	)		-			-		-
Net earnings (loss)		-		-			-			62,366			-			62,366			179		62,545
Other comprehensive income		-		-			-			-			28,631			28,631			-		28,631
Conversion of Class B shares (31,800 shares)		3		(3	)		-			-			-			-			-		-
Temporary equity reclassification		-		-			1,080			-			-			1,080			-		1,080
Issuance of stock and related tax withholdings for vested restricted stock units (211,328 shares)		21		-			(2,318	)		-			-			(2,297	)		-		(2,297	)
Dividends declared ($0.0675 per share)		-		-			11			(9,746	)		-			(9,735	)		-		(9,735	)
Stock compensation expense		-		-			2,483			-			-			2,483			-		2,483
Balance at March 31, 2018	$	13,212	$	1,210		$	1,753,762		$	(307,833	)	$	52,544		$	1,512,895		$	2,211	$	1,515,106

Balance at December 31, 2018		13,212		1,210			1,436,011			(61,258	)		(6,791	)		1,382,384			2,286		1,384,670
Cumulative effect of accounting change for adoption of ASU 2016-02 (see Note 1)		-		-			-			23,013			-			23,013			-		23,013
Net earnings		-		-			-			75,459			-			75,459			182		75,641
Other comprehensive income (loss)		-		-			-			-			(8,532	)		(8,532	)		-		(8,532	)
Conversion of Class B shares (18 shares)		-		-			-			-			-			-			-		-
Temporary equity reclassification		-		-			3			-			-			3			-		3
Issuance of stock and related tax withholdings for vested restricted stock units (220,718 shares)		22		-			(2,681	)		-			-			(2,659	)		-		(2,659	)
Dividends declared ($0.0850 per share)		-		-			15			(12,292	)		-			(12,277	)		-		(12,277	)
Stock compensation expense		-		-			3,536			-			-			3,536			-		3,536
Repurchase of convertible senior debentures		-		-			(11,783	)		-			-			(11,783	)		-		(11,783	)
Balance at March 30, 2019	$	13,234	$	1,210		$	1,425,101		$	24,922		$	(15,323	)	$	1,449,144		$	2,468	$	1,451,612

See accompanying notes.

NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts)

Note 1 – Basis of Presentation

The accompanying unaudited consolidated condensed financial statements of Vishay Intertechnology, Inc. (“Vishay” or the “Company”) have been prepared in accordance with the instructions to Form 10-Q and therefore do not include all information and footnotes necessary for presentation of financial position, results of operations, and cash flows required by accounting principles generally accepted in the United States (“GAAP”) for complete financial statements. The information furnished reflects all normal recurring adjustments which are, in the opinion of management, necessary for a fair summary of the financial position, results of operations, and cash flows for the interim periods presented. The financial statements should be read in conjunction with the consolidated financial statements filed with the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. The results of operations for the fiscal quarter and three fiscal months ended March 30, 2019 are not necessarily indicative of the results to be expected for the full year.

The Company reports interim financial information for 13-week periods beginning on a Sunday and ending on a Saturday, except for the first fiscal quarter, which always begins on January 1, and the fourth fiscal quarter, which always ends on December 31. The four fiscal quarters in 2019 end on March 30, 2019, June 29, 2019, September 28, 2019, and December 31, 2019, respectively. The four fiscal quarters in 2018 ended on March 31, 2018, June 30, 2018, September 29, 2018, and December 31, 2018, respectively.

Recently Adopted Accounting Guidance

In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-02, Leases (Topic 842). The ASU is the result of a project between the FASB and the International Accounting Standards Board to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The guidance in ASU No. 2016-02 and all related ASUs is codified in Accounting Standard Codification (“ASC”) Topic 842, Leases. The Company adopted ASC Topic 842 effective January 1, 2019. Upon adoption at January 1, 2019, the Company recognized right of use assets of $91,462 and lease liabilities of $95,784 on the consolidated balance sheet. The difference between the initial right of use asset and lease liability balances recognized upon adoption of ASC Topic 842 is primarily due to accrued lease incentive balances at December 31, 2018.

On December 20, 2018, the Company received sale proceeds of $45,500 and concurrently leased-back its former manufacturing site in Santa Clara, California, under a short-term arrangement, to raze the buildings. Upon adoption of ASC Topic 842, the Company was required to reassess the accounting for these transactions. The transactions did not qualify as a completed sale and leaseback under previous GAAP. However, pursuant to ASC Topic 842’s sale and leaseback guidance, the transaction would qualify as a completed sale. The Company recognized a cumulative-effect adjustment to retained earnings (accumulated deficit) of $23,013, to recognize the sale as of the date of adoption, and derecognized the land, building, and related deferred proceeds, which had been recorded in other accrued expenses.

The adoption of the ASU did not have a material impact on the Company's results of operations or cash flows. See Note 3.

Recently Issued Accounting Guidance

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The ASU replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The ASU is effective for the Company for interim and annual periods beginning on or after January 1, 2020, with the ability to early adopt for interim and annual periods beginning on or after January 1, 2019. The Company is currently evaluating the effect of the ASU on its financial assets measured at amortized cost.

Reclassifications

Certain prior period amounts have been reclassified to conform to the current financial statement presentation.

NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts)

Note 2 – Revenue Recognition

Sales returns and allowances accrual activity is shown below:

	Fiscal quarters ended
	March 30, 2019			March 31, 2018
Beginning balance	$	42,663		$	36,680
Sales allowances		28,211			24,188
Credits issued		(33,062	)		(28,450	)
Foreign currency		(235	)		288
Ending balance	$	37,577		$	32,706

See disaggregated revenue information in Note 10.

NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts)

Note 3 – Leases

The Company leases buildings and machinery and equipment used for manufacturing and/or sales and administrative purposes. The Company is also party to various service, warehousing, and other agreements that it evaluates for potential embedded leases. Substantially all of the Company’s leases are structured and classified as operating leases. As of January 1, 2019, the Company accounts for its leases in accordance with ASC Topic 842.

The Company leases assets in each region in which it operates. The Company’s leases are generally denominated in the currency of the leased assets' location, which may not be the functional currency of the subsidiary lessee. Accordingly, the Company remeasures its lease liability and recognizes a transactional gain/loss for leases denominated in currencies other than the functional currency of the subsidiary lessee.

The Company recognizes right of use assets and lease liabilities for leases greater than twelve months in duration based on the contract consideration for lease components through the term of the lease and the applicable discount rate. Leases with a duration less than or equal to twelve months are considered short-term leases. The Company does not recognize right of use assets or lease liabilities for short-term leases and classifies the expense as short-term lease expense. Variable lease payments based on an index or rate are included in the right of use assets and lease liabilities based on the effective rates at lease commencement. Changes in the rates or indices do not impact the right of use asset or lease liability and are recognized as a component of lease expense in the statement of operations. Variable lease payments not based on an index or rate are not included in the initial right of use asset and lease liability and are recognized when incurred as a component of lease expense in the statement of operations.

The Company has elected to not separate contract consideration for lease and non-lease components for its building leases. In addition to the noncancellable period of a lease, the Company includes periods covered by extension options it is reasonably certain to exercise, termination options that it is reasonably certain not to exercise, and extension and termination options controlled by the lessor in its determination of the lease term. The Company uses the rate implicit in the contract whenever possible when determining the applicable discount rate. When the implicit rate is not used, the Company employs a portfolio approach based on the duration of the lease. The portfolio lease rates are calculated monthly.

No individual lease is considered significant and there are no leases that have not yet commenced that are considered significant.

The net right of use assets and lease liabilities recognized on the consolidated condensed balance sheet for the Company's operating leases as of March 30, 2019 and the net right of use assets and lease liabilities recognized upon the adoption of ASC Topic 842 on January 1, 2019 are presented below:

	March 30, 2019		January 1, 2019
Right of use assets
Operating Leases
Buildings and improvements	$	91,106	$	86,058
Machinery and equipment		5,175		5,404
Total	$	96,281	$	91,462
Current lease liabilities
Operating Leases
Buildings and improvements	$	12,076	$	10,644
Machinery and equipment		2,684		3,317
Total	$	14,760	$	13,961
Long-term lease liabilities
Operating Leases
Buildings and improvements	$	84,202	$	79,000
Machinery and equipment		2,482		2,823
Total	$	86,684	$	81,823
Total lease liabilities	$	101,444	$	95,784

NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts)

Lease expense is classified in the statement of operations based on asset use. Total lease cost recognized on the consolidated condensed statement of operations is as follows:

	Fiscal quarter ended
	March 30, 2019
Lease expense
Operating lease expense	$	5,536
Short-term lease expense		833
Variable lease expense		12
Total lease expense	$	6,381

The Company paid $5,050 for its operating leases in the fiscal quarter ended March 31, 2019, which are included in operating cash flows on the consolidated condensed statement of cash flows. The weighted-average remaining lease term for the Company's operating leases is 9.3 years and the weighted-average discount rate is 6.1% as of March 30, 2019.

The undiscounted future lease payments for the Company's operating lease liabilities are as follows:

	March 30, 2019
2019 (excluding the three fiscal months ended March 30, 2019)	$	15,916
2020		18,527
2021		15,502
2022		13,036
2023		12,215
Thereafter		60,661

The undiscounted future lease payments presented in the table above include payments through the term of the lease, which may include periods beyond the noncancellable term. The difference between the total payments above and the lease liability balance is due to the discount rate used to calculate lease liabilities.

The Company elected to use the package of practical expedients available in ASC Topic 842; and accordingly, did not reassess existing contracts for leases, the classification of existing leases, or initial direct costs for any existing leases. The Company also elected to use the practical expedient available in ASC Topic 842 for land easements.

The Company did not elect the practical expedient available in ASC Topic 842 to use hindsight in determining the lease term. Accordingly, the remaining lease term as of January 1, 2019 was used to calculate the initial right of use asset and lease liability.

NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts)

Note 4 – Acquisition Activities

As part of its growth strategy, the Company seeks to expand through targeted acquisitions of other manufacturers of electronic components that have established positions in major markets, reputations for product quality and reliability, and product lines with which the Company has substantial marketing and technical expertise.

On January 3, 2019, the Company acquired substantially all of the assets of Bi-Metallix, Inc. ("Bi-Metallix"), a U.S.-based, privately-held provider of electron beam continuous strip welding services for $11,862. The Company was a major customer of Bi-Metallix, and the acquired business is being vertically integrated into the Company's Resistors & Inductors segment. Based on an estimate of their fair values, the Company allocated $2,900 of the purchase price to definite-lived intangible assets. After allocating the purchase price to the assets acquired and liabilities assumed based on an estimation of their fair values at the date of acquisition, the Company recorded goodwill of $3,324 related to this acquisition. The results and operations of this acquisition have been included in the Resistors & Inductors segment since January 3, 2019. The inclusion of this acquisition did not have a material impact on the Company's consolidated results for the fiscal quarter ended March 30, 2019. The goodwill related to this acquisition is included in the Resistors & Inductors reporting unit for goodwill impairment testing.

Had this acquisition occurred as of the beginning of the periods presented in these consolidated condensed financial statements, the pro forma statements of operations would not be materially different than the consolidated condensed statements of operations presented.

The remaining fluctuation in the goodwill account balance is due to foreign currency translation.

NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts)

Note 5 – Income Taxes

The provision for income taxes consists of provisions for federal, state, and foreign income taxes. The effective tax rates for the periods ended March 30, 2019 and March 31, 2018 reflect the Company’s expected tax rate on reported income from continuing operations before income tax and tax adjustments. The Company operates in a global environment with significant operations in various jurisdictions outside the United States. Accordingly, the consolidated income tax rate is a composite rate reflecting the Company’s earnings and the applicable tax rates in the various jurisdictions where the Company operates.

As of March 30, 2019, the Company has approximately $300,000 of unremitted foreign earnings that the Company has deemed not permanently reinvested and thus has accrued foreign withholding and other taxes. The Company continues to evaluate the timing and uses of the remaining amounts, and may decide to ultimately not repatriate some of these amounts.

The Company’s repurchase of a portion of the outstanding convertible debentures in the first fiscal quarter of 2019 (see Note 6) slightly reduced the Company’s expected 2019 tax rate. The Company recognized a tax benefit on the pre-tax loss on early extinguishment of debt. The Company also recognized a tax benefit of $1,312 resulting from the extinguishment, reflecting the reduction in deferred tax liabilities related to the special tax attributes of the debentures.

Income tax expense for the fiscal quarter ended March 30, 2019, includes tax benefit of $585 for the periodic remeasurement of the deferred tax liability recorded for the foreign taxes associated with the Company's cash repatriation program.

Income tax expense for the fiscal quarter ended March 31, 2018 included tax expense of $1,316 for the periodic remeasurement of the deferred tax liability recorded for the Company's cash repatriation program.

During the fiscal quarter ended March 30, 2019, the liabilities for unrecognized tax benefits increased by $1,446 on a net basis, due to increases for tax positions taken in the current and prior periods and interest, offset by expiration of a statute.

NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts)

Note 6 – Long-Term Debt

Long-term debt consists of the following:

	March 30, 2019			December 31, 2018

Credit facility	$	-		$	-
Convertible senior notes, due 2025		498,629			495,203
Convertible senior debentures, due 2040		144			539
Convertible senior debentures, due 2041		8,085			12,812
Convertible senior debentures, due 2042		-			923
Deferred financing costs		(14,028	)		(14,968	)
		492,830			494,509
Less current portion		-			-
	$	492,830		$	494,509

Convertible Debt Instruments

The following table summarizes some key facts and terms regarding the outstanding convertible debt instruments as of March 30, 2019:

	Convertible Senior Notes Due 2025			Convertible Senior Debentures Due 2040			Convertible Senior Debentures Due 2041
Issuance date	June 12, 2018			November 9, 2010			May 13, 2011
Maturity date	June 15, 2025			November 15, 2040			May 15, 2041
Principal amount as of March 30, 2019	$	600,000		$	350		$	20,790
Cash coupon rate (per annum)		2.25	%		2.25	%		2.25	%
Nonconvertible debt borrowing rate at issuance (per annum)		5.50	%		8.00	%		8.375	%
Conversion rate effective March 13, 2019 (per $1 principal amount)		31.7536			78.7076			57.4367
Effective conversion price effective March 13, 2019 (per share)	$	31.49		$	12.71		$	17.41
130% of the conversion price (per share)	$	40.94		$	16.52		$	22.63
Call date		n/a		November 20, 2020			May 20, 2021

The terms of the convertible senior debentures due 2040 and due 2041 are generally congruent. The terms of the fully retired convertible senior debentures due 2042 were also generally congruent to the convertible senior debentures due 2040 and due 2041.

Prior to three months before the maturity date, the holders may convert their convertible senior debentures due 2040 and due 2041 only under the following circumstances: (1) during any fiscal quarter after the first full quarter subsequent to issuance, if the sale price of Vishay common stock reaches 130% of the conversion price for a specified period; (2) the trading price of the debentures falls below 98% of the product of the sale price of Vishay's common stock and the conversion rate for a specified period; (3) Vishay calls any or all of the debentures for redemption, at any time prior to the close of business on the third scheduled trading day immediately preceding the redemption date; or (4) upon the occurrence of specified corporate events.

Prior to December 15, 2024, the holders of the convertible senior notes due 2025 may convert their notes only under the following circumstances: (1) during any fiscal quarter after the fiscal quarter ending September 29, 2018, if the sale price of Vishay common stock reaches 130% of the conversion price for a specified period (initially $40.94); (2) the trading price of the notes falls below 98% of the product of the sale price of Vishay's common stock and the conversion rate for a specified period; or (3) upon the occurrence of specified corporate transactions.

The convertible senior debentures due 2040 became convertible subsequent to the September 30, 2017 evaluation of the conversion criteria, and have remained convertible for each subsequent quarterly evaluation through the March 30, 2019 evaluation, due to the sale price of Vishay's common stock exceeding 130% of the conversion price for the applicable periods. The convertible senior debentures due 2040 will remain convertible until June 29, 2019, at which time the conversion criteria will be reevaluated. At the direction of its Board of Directors, the Company intends, upon future conversion of any of the convertible debt instruments, to repay the principal amounts of the convertible debt instruments in cash and settle any additional amounts in shares of Vishay common stock. The excess of the amount that the Company would pay to the holders of the convertible senior debentures due 2040 upon conversion over the carrying value of the liability component of the debentures currently convertible has been reclassified as temporary equity on the consolidated condensed financial statements. The Company intends to finance the principal amount of any converted debentures using borrowings under its credit facility. Accordingly, the debt component of the convertible senior debentures due 2040 continues to be classified as a non-current liability on the consolidated condensed balance sheets.

NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts)

The quarterly cash dividend program of the Company results in adjustments to the conversion rate and effective conversion price for the convertible debt instruments effective as of the ex-dividend date of each cash dividend. The conversion rate and effective conversion price for the convertible senior notes due 2025 is adjusted for quarterly cash dividends to the extent such dividends exceed $0.085 per share of common stock.

GAAP requires an issuer to separately account for the liability and equity components of the instrument in a manner that reflects the issuer’s nonconvertible debt borrowing rate when interest costs are recognized in subsequent periods. The resulting discount on the debt is amortized as non-cash interest expense in future periods.

The carrying values of the liability and equity components of the convertible debt instruments are reflected in the Company’s consolidated condensed balance sheets as follows:

	Principal amount of the debt instruments		Unamortized discount			Embedded derivative		Carrying value of liability component		Equity component (including temporary equity) - net carrying value
March 30, 2019
Convertible senior notes due 2025	$	600,000		(101,371	)		-	$	498,629	$	85,262
Convertible senior debentures due 2040 and due 2041	$	21,140		(12,935	)		24	$	8,229	$	8,767
Total	$	621,140	$	(114,306	)	$	24	$	506,858	$	94,029

December 31, 2018
Convertible senior notes due 2025	$	600,000		(104,797	)		-	$	495,203	$	85,262
Convertible senior debentures due 2040, due 2041, and due 2042	$	36,556		(22,352	)		70	$	14,274	$	15,092
Total	$	636,556	$	(127,149	)	$	70	$	509,477	$	100,354

Interest is payable on the convertible debt instruments semi-annually at the cash coupon rate; however, the remaining debt discount is being amortized as additional non-cash interest expense using an effective annual interest rate equal to the Company’s estimated nonconvertible debt borrowing rate at the time of issuance. In addition to ordinary interest, contingent interest will accrue in certain circumstances relating to the trading price of the convertible senior debentures due 2040 and due 2041 and under certain other circumstances, beginning ten years subsequent to their respective issuance. The convertible senior notes due 2025 do not possess contingent interest features.

Interest expense related to the convertible debt instruments is reflected on the consolidated condensed statements of operations for the fiscal quarters ended:

	Contractual coupon interest		Non-cash amortization of debt discount		Non-cash amortization of deferred financing costs		Non-cash change in value of derivative liability			Total interest expense related to the debt instruments
March 30, 2019
Convertible senior notes due 2025	$	3,375		3,426		454		-		$	7,255
Convertible senior debentures	$	148		64		2		(18	)	$	196
Total	$	3,523	$	3,490	$	456	$	(18	)	$	7,451

March 31, 2018
Convertible senior notes due 2025	$	-		-		-		-		$	-
Convertible senior debentures	$	3,235		1,309		47		161		$	4,752
Total	$	3,235	$	1,309	$	47	$	161		$	4,752

The Company used cash to repurchase $960, $12,288 and $2,168 principal amounts of convertible senior debentures due 2040, due 2041, and due 2042, respectively, in the first fiscal quarter of 2019. The net carrying value of the debentures repurchased were $396, $4,770, and $924, respectively. In accordance with the authoritative accounting guidance for convertible debentures, the aggregate repurchase payment of $22,695 was allocated between the liability ($7,311) and equity (including temporary equity, $15,384) components of the convertible debentures, using the Company's nonconvertible debt borrowing rate at the time of the repurchase. As a result, the Company recognized a loss on extinguishment of convertible debentures of $1,307, including the write-off of a portion of unamortized debt issuance costs. The convertible senior debentures due 2042 have been fully repurchased, and the trustee has confirmed that the Company has satisfied and discharged its obligations under the indenture governing the convertible senior debentures due 2042.

NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts)

Note 7 – Accumulated Other Comprehensive Income (Loss)

The cumulative balance of each component of other comprehensive income (loss) and the income tax effects allocated to each component are as follows:

	Pension and other post-retirement actuarial items			Currency translation adjustment			Total
Balance at January 1, 2019	$	(58,291	)	$	51,500		$	(6,791	)
Other comprehensive income before reclassifications		-			(9,989	)	$	(9,989	)
Tax effect		-			-		$	-
Other comprehensive income before reclassifications, net of tax		-			(9,989	)	$	(9,989	)
Amounts reclassified out of AOCI		2,064			-		$	2,064
Tax effect		(607	)		-		$	(607	)
Amounts reclassified out of AOCI, net of tax		1,457			-		$	1,457
Net other comprehensive income	$	1,457		$	(9,989	)	$	(8,532	)
Balance at March 30, 2019	$	(56,834	)	$	41,511		$	(15,323	)

Reclassifications of pension and other post-retirement actuarial items out of AOCI are included in the computation of net periodic benefit cost. See Note 8 for further information.

NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts)

Note 8 – Pensions and Other Postretirement Benefits

The Company maintains various retirement benefit plans.

Defined Benefit Pension Plans

The following table shows the components of the net periodic pension cost for the first fiscal quarters of 2019 and 2018 for the Company’s defined benefit pension plans:

	Fiscal quarter ended March 30, 2019					Fiscal quarter ended March 31, 2018
	U.S. Plans		Non-U.S. Plans			U.S. Plans		Non-U.S. Plans

Net service cost	$	-	$	852		$	-	$	948
Interest cost		424		1,291			371		1,242
Expected return on plan assets		-		(490	)		-		(488	)
Amortization of prior service cost		36		51			36		55
Amortization of losses		118		1,359			159		1,604
Curtailment and settlement losses		-		505			-		462
Net periodic benefit cost	$	578	$	3,568		$	566	$	3,823

Other Postretirement Benefits

The following table shows the components of the net periodic benefit cost for the first fiscal quarters of 2019 and 2018 for the Company’s other postretirement benefit plans:

	Fiscal quarter ended March 30, 2019					Fiscal quarter ended March 31, 2018
	U.S. Plans			Non-U.S. Plans		U.S. Plans			Non-U.S. Plans

Service cost	$	35		$	72	$	34		$	75
Interest cost		77			30		68			30
Amortization of prior service (credit)		-			-		(37	)		-
Amortization of losses (gains)		(32	)		27		(10	)		27
Net periodic benefit cost	$	80		$	129	$	55		$	132

NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts)

Note 9 – Stock-Based Compensation

The Company has various stockholder-approved programs which allow for the grant of stock-based compensation to officers, employees, and non-employee directors of the Company.

The amount of compensation cost related to stock-based payment transactions is measured based on the grant-date fair value of the equity instruments issued. The Company determines compensation cost for restricted stock units (“RSUs”) and phantom stock units based on the grant-date fair value of the underlying common stock adjusted for expected dividends paid over the required vesting period for non-participating awards. Compensation cost is recognized over the period that an officer, employee, or non-employee director provides service in exchange for the award.

The following table summarizes stock-based compensation expense recognized:

	Fiscal quarters ended
	March 30, 2019		March 31, 2018

Restricted stock units	$	3,359	$	2,269
Phantom stock units		177		214
Total	$	3,536	$	2,483

The Company recognizes compensation cost for RSUs that are expected to vest and records cumulative adjustments in the period that the expectation changes.

The following table summarizes unrecognized compensation cost and the weighted average remaining amortization periods at March 30, 2019 (amortization periods in years):

	Unrecognized Compensation Cost		Weighted Average Remaining Amortization Periods

Restricted stock units	$	5,669		1.0
Phantom stock units		-		0.0
Total	$	5,669

The Company currently expects all performance-based RSUs to vest and all of the associated unrecognized compensation cost for performance-based RSUs presented in the table above to be recognized.

NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts)

2007 Stock Incentive Plan

The Company’s 2007 Stock Incentive Program (the “2007 Program”), as amended and restated, permits the grant of up to 6,500,000 shares of restricted stock, unrestricted stock, RSUs, stock options, and phantom stock units, to officers, employees, and non-employee directors of the Company. Such instruments are available for grant until May 20, 2024.

Restricted Stock Units

RSU activity under the 2007 Program as of March 30, 2019 and changes during the three fiscal months then ended are presented below (number of RSUs in thousands):

	Number of RSUs			Weighted Average Grant-date Fair Value per Unit
Outstanding:
January 1, 2019		904		$	14.77
Granted		314			19.85
Vested*		(349	)		11.50
Cancelled or forfeited		-			-
Outstanding at March 30, 2019		869		$	17.92

Expected to vest at March 30, 2019		855

* The number of RSUs vested includes shares that the Company withheld on behalf of employees to satisfy the statutory tax withholding requirements.

The number of performance-based RSUs that are scheduled to vest increases ratably based on the achievement of defined performance criteria between the established target and maximum levels. RSUs with performance-based vesting criteria are expected to vest as follows (number of RSUs in thousands):

Vesting Date	Expected to Vest		Not Expected to Vest		Total
January 1, 2020		167		-		167
January 1, 2021		141		-		141
January 1, 2022		174		-		174

Phantom Stock Units

The 2007 Program authorizes the grant of phantom stock units to the extent provided for in the Company’s employment agreements with certain executives. Each phantom stock unit entitles the recipient to receive a share of common stock at the individual’s termination of employment or any other future date specified in the applicable employment agreement. Phantom stock units participate in dividend distribution on the same basis as the Company's common stock and Class B common stock. Dividend equivalents are issued in the form of additional units of phantom stock. The phantom stock units are fully vested at all times.

Phantom stock unit activity under the phantom stock plan as of March 30, 2019 and changes during the three fiscal months then ended are presented below (number of phantom stock units in thousands):

	Number of units		Grant-date Fair Value per Unit
Outstanding:
January 1, 2019		170
Granted		10	$	17.72
Dividend equivalents issued		1
Outstanding at March 30, 2019		181

NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts)

Note 10 – Segment Information

Vishay is a global manufacturer and supplier of electronic components. Vishay operates, and its chief operating decision maker makes strategic and operating decisions with regards to assessing performance and allocating resources based on, five reporting segments: MOSFETs, Diodes, Optoelectronic Components, Resistors & Inductors, and Capacitors. These segments represent groupings of product lines based on their functionality:

●		Metal oxide semiconductor field-effect transistors ("MOSFETs") function as solid-state switches to control power.
●		Diodes route, regulate, and block radio frequency, analog, and power signals; protect systems from surges or electrostatic discharge damage; or provide electromagnetic interference filtering.
●		Optoelectronic components emit light, detect light, or do both.
●		Resistors and inductors both impede electric current. Resistors are basic components used in all forms of electronic circuitry to adjust and regulate levels of voltage and current. Inductors use an internal magnetic field to change alternating current phase and resist alternating current.
●		Capacitors store energy and discharge it when needed.

Vishay's reporting segments generate substantially all of their revenue from product sales to the industrial, automotive, telecommunications, computing, consumer products, power supplies, military and aerospace, and medical end markets. A small portion of revenues is from royalties.

The Company evaluates business segment performance on operating income, exclusive of certain items (“segment operating income”). Only dedicated, direct selling, general, and administrative expenses of the segments are included in the calculation of segment operating income. The Company’s calculation of segment operating income excludes such selling, general, and administrative costs as global operations, sales and marketing, information systems, finance and administration groups, as well as restructuring and severance costs, goodwill and long-lived asset impairment charges, and other items. Management believes that evaluating segment performance excluding such items is meaningful because it provides insight with respect to intrinsic operating results of the Company. These items represent reconciling items between segment operating income and consolidated operating income. Business segment assets are the owned or allocated assets used by each business.

The Company also regularly evaluates gross profit by segment to assist in the analysis of consolidated gross profit. The Company considers segment operating income to be the more important metric because it more fully captures the business operations of the segments.

NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts)

The following tables set forth business segment information:

	MOSFETs		Diodes		Optoelectronic Components		Resistors & Inductors		Capacitors		Total
Fiscal quarter ended March 30, 2019:
Net revenues	$	137,341	$	167,840	$	60,562	$	260,471	$	118,945	$	745,159

Gross profit	$	36,059	$	43,492	$	16,017	$	85,869	$	29,722	$	211,159

Segment operating income	$	26,678	$	38,128	$	11,710	$	76,987	$	24,566	$	178,069

Fiscal quarter ended March 31, 2018:
Net revenues	$	127,506	$	167,017	$	71,958	$	244,046	$	106,268	$	716,795

Gross profit	$	32,022	$	43,200	$	27,233	$	78,530	$	24,315	$	205,300

Segment operating income	$	22,558	$	37,931	$	22,794	$	70,002	$	18,893	$	172,178

	Fiscal quarters ended
	March 30, 2019			March 31, 2018
Reconciliation:
Segment Operating Income	$	178,069		$	172,178
Unallocated Selling, General, and Administrative Expenses		(70,334	)		(68,116	)
Consolidated Operating Income		107,735		$	104,062
Unallocated Other Income (Expense)		(7,787	)		(12,043	)
Consolidated Income Before Taxes	$	99,948			92,019

NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts)

The Company has a broad line of products that it sells to OEMs, EMS companies, and independent distributors. The distribution of sales by customer type is shown below:

	Fiscal quarters ended
	March 30, 2019		March 31, 2018
Distributors	$	411,560	$	404,060
OEMs		282,636		264,050
EMS companies		50,963		48,685
Total Revenue	$	745,159	$	716,795

Net revenues were attributable to customers in the following regions:

	Fiscal quarters ended
	March 30, 2019		March 31, 2018
Asia	$	259,726	$	285,478
Europe		278,899		267,382
Americas		206,534		163,935
Total Revenue	$	745,159	$	716,795

The Company generates substantially all of its revenue from product sales to end customers in the industrial, automotive, telecommunications, computing, consumer products, power supplies, military and aerospace, and medical end markets. Sales by end market are presented below:

	Fiscal quarters ended
	March 30, 2019		March 31, 2018
Industrial	$	281,590	$	280,212
Automotive		214,786		208,394
Telecommunications		53,280		45,924
Computing		47,508		47,431
Consumer Products		34,049		37,259
Power Supplies		30,127		34,243
Military and Aerospace		47,561		35,214
Medical		36,258		28,118
Total revenue	$	745,159	$	716,795

NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts)

Note 11 – Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share attributable to Vishay stockholders (shares in thousands):

	Fiscal quarters ended
	March 30, 2019		March 31, 2018

Numerator:
Net earnings attributable to Vishay stockholders	$	75,459	$	62,366

Denominator:
Denominator for basic earnings per share:
Weighted average shares		144,375		144,160
Outstanding phantom stock units		179		167
Adjusted weighted average shares - basic		144,554		144,327

Effect of dilutive securities:
Convertible and exchangeable debt instruments		237		14,610
Restricted stock units		498		565
Dilutive potential common shares		735		15,175

Denominator for diluted earnings per share:
Adjusted weighted average shares - diluted		145,289		159,502

Basic earnings per share attributable to Vishay stockholders	$	0.52	$	0.43

Diluted earnings per share attributable to Vishay stockholders	$	0.52	$	0.39

Closing Price ($)	Shares Out (MM)	Market Cap ($MM)
$17.88	144	$2,580

10-Q	2019-03-30	Quarter: 2019-03-30
10-K	2018-12-31	Annual: 2018-12-31
10-Q	2018-09-29	Quarter: 2018-09-29
10-Q	2018-06-30	Quarter: 2018-06-30
10-Q	2018-03-31	Quarter: 2018-03-31
10-K	2017-12-31	Annual: 2017-12-31
10-Q	2017-09-30	Quarter: 2017-09-30
10-Q	2017-07-01	Quarter: 2017-07-01
10-Q	2017-04-01	Quarter: 2017-04-01
10-K	2016-12-31	Annual: 2016-12-31
10-Q	2016-10-01	Quarter: 2016-10-01
10-Q	2016-07-02	Quarter: 2016-07-02
10-Q	2016-04-02	Quarter: 2016-04-02
10-K	2015-12-31	Annual: 2015-12-31
10-Q	2015-10-03	Quarter: 2015-10-03
10-Q	2015-07-04	Quarter: 2015-07-04
10-Q	2015-04-04	Quarter: 2015-04-04
10-K	2014-12-31	Annual: 2014-12-31
10-Q	2014-09-27	Quarter: 2014-09-27
10-Q	2014-06-28	Quarter: 2014-06-28
10-Q	2014-03-29	Quarter: 2014-03-29
10-K	2013-12-31	Annual: 2013-12-31

8-K	2019-07-10	Earnings, Exhibits
8-K	2019-06-12	Regulation FD
8-K	2019-06-05	Enter Agreement, Leave Agreement, Off-BS Arrangement, Other Events, Exhibits
8-K	2019-05-14	Officers, Shareholder Vote
8-K	2019-05-08	Earnings, Regulation FD, Other Events, Exhibits
8-K	2019-03-11	Leave Agreement, Regulation FD
8-K	2019-02-14	Other Events, Exhibits
8-K	2019-02-05	Earnings, Regulation FD, Exhibits
8-K	2018-12-18	Other Events
8-K	2018-12-05	Regulation FD
8-K	2018-11-27	Officers, Exhibits
8-K	2018-10-29	Earnings, Regulation FD, Other Events, Exhibits
8-K	2018-09-13	Regulation FD
8-K	2018-08-21	Other Events, Exhibits
8-K	2018-08-07	Earnings, Regulation FD, Exhibits
8-K	2018-06-08	Regulation FD, Exhibits
8-K	2018-06-07	Enter Agreement, Off-BS Arrangement, Sale of Shares, Regulation FD, Other Events, Exhibits
8-K	2018-06-06	Regulation FD, Exhibits
8-K	2018-05-15	Shareholder Vote
8-K	2018-03-13	Regulation FD
8-K	2018-03-06	Officers, Exhibits
8-K	2018-02-06	Earnings, Regulation FD, Exhibits

TPH	Tri Pointe Group	1,880
USPH	US Physical Therapy	1,490
FI	Frank's	1,350
ANH	Anworth Mortgage Asset	408
GLRE	Greenlight Capital	391
SMSI	Smith Micro Software	104
IZEA	IZEA	8
BVTK	Bravatek Solutions	0
WIZD	Wizard World	0
BDCO	Blue Dolphin Energy	0

EX-10.1	exhibit10-1.htm
EX-31.1	exhibit31-1.htm
EX-31.2	exhibit31-2.htm
EX-32.1	exhibit32-1.htm
EX-32.2	exhibit32-2.htm